In the case, FHR European Ventures LLP and others v Cedar Capital Partners LLC [2014] UKSC 45, the Supreme Court ruled that bribes and secret commissions given to an agent were the property of the principal. 

FHR European Ventures LLP (FHR) purchased the share capital of Monte Carlo Grand Hotel SAM from the vendor. Cedar Capital Partners LLC (Cedar) acted as FHR’s agent during the negotiations. However, Cedar was also paid €10 million by the vendor following the completion of the sale. FHR began proceedings in November 2009 for the recovery of the €10 million. The judge concluded that there had been a breach of fiduciary duty by Cedar who were ordered to pay the money to FHR. The judge refused, however, to grant FHR a proprietary remedy. FHR appealed. The Court of Appeal allowed the appeal, finding that Cedar had received the €10 million on constructive trust for FHR absolutely.

The general rule is that where an agent has acquired a benefit which came to his notice as a result of his fiduciary position or pursuant to an opportunity which resulted from his fiduciary position he is to be treated as having acquired the benefit on behalf of his principal, so that it is beneficially owned by the principal. The Supreme Court considered whether a bribe or secret commission received by an agent falls under this rule. Is it held by the agent on trust for his principal or does the principal merely have a claim for equitable compensation in a sum equal to the value of the bribe or commission? If it is held on trust then the principal has a proprietary claim and so has priority over any unsecured creditors.

The Supreme Court concluded that despite some contrary decisions many of the decisions and the practical and policy decisions favoured a wide application of the rule. It therefore dismissed the appeal and ruled that the bribe should be treated as the property of the principal.

A copy of the judgment is available. http://www.bailii.org/uk/cases/UKSC/2014/45.html